Foreign Exchange Market

Foreign Exchange Market

One function of the foreign exchange market is to convert the currency of one country into the currency of another. A second function of the foreign exchange market is to provide insurance against foreign exchange risk. The most common approach to exchange rate forecasting is fundamental analysis. This relies on variables such as money supply growth, inflation rates, nominal interest rates, and balance-of-payment positions to predict future changes in exchange rates. Identify a country outside of the U.S. and its currency and initial exchange rate. Answer the following questions in 250-350 words :

  • How stable is the currency against the U.S. dollar?
  • Why is this so?
  • How many other countries trade with your chosen host country?
  • Are there risks involved in doing business with this country?

What are the projections for this country’s expansion over the next 10 yea

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The country identified, in this case, is Kenya, a country in Africa, East Africa to be precise. The currency used in the country is referred to as the Kenyan Shilling and it is quite unstable compared to the U.S dollar which has been recognized as the world’s currency…………………………………….


352 Words